Ratio Analysis
Valuations
Charting Technique
Cost of Equity
- It is a return to a company for its capital investments
- Of the available sources (i)Debt (ii)Equity., Later provides higher rate of return than DEBT
- Dividend Growth Model
- Capital Asset Pricing Model
- Company must pay dividends
- It is not necessary that company requires to pay dividends
- Beta: Risk on stock price
We can calcuate cost of equity in two ways:
Dividend Growth Model:
Capital Asset Pricing Model:
Cost of Equity = Risk-Free Rate of Return + Beta * (Market Rate of Return - Risk-Free Rate of Return)